By Shuli Ren

Sterne Agee analyst David Bain expects the company to apply for a listing within a month. Here are the details:

AERL is in the process of finalizing its prospectus for its HK Listing. The final listing is scheduled for completion before the end of the year.

The HK Listing should be by Introduction. In a Listing by Introduction, a Company which has shares already in issuance on another exchange can list its shares on the SEHK (provided it meets certain requirements) without raising new funds/issuing new shares.

A dual-listing decision was driven by overtures from Mainland Chinese and HK institutional investors, combined with management/BOD frustration over its US market equity multiple.

In other words, AERL feels U.S. investors do not understand its business model and Asian investors know better.

How does this news affect U.S. investors?

First, this listing does not involve issuing new shares, which means there is no dilution. Management and cornerstone investors have already purchased $60 million AERL stocks in the U.S. that they intend to list in Hong Kong. AERL has $161 million market cap.

Second, if indeed Asian investors know better and AERL is chronically undervalued, by international arbitrage, sentiments towards AERL will improve. According to Sterne Agee, 54% of the shares the company management purchased were bought at 17% premium to market price with a 24-month lock-up period, signaling their confidence.

The broker gives a target price of $9,5, and a Buy, citing attractive valuations. AERL looks like a cash cow right now. Its free-cash-flow yield is 28%. The target price has a 130% upside.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.